The Amazon Credit Builder card will offer rewards – unlike most secured cards – but the APR is higher than the current credit card average. Is it right for you? Here’s what you need to know.
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Dear Cashing In,
Amazon just came out with a new card that looks like it might be right for me. It is aimed at people with low credit scores, but it also gives rewards like 5 percent off Amazon purchases. Is it worth it? What’s the catch? – Jeff
This month, Amazon announced a new card called the Amazon Prime Store Card Credit Builder. Offered in partnership with Synchrony Bank, it is aimed at people with poor credit or limited credit history.
One of the unusual aspects of the card, as CreditCards.com’s analyst Ted Rossman noted in the press, is that it is a store card that is also a secured credit card.
“Secured cards have long been a good way for people to build or rebuild credit, and a lot of banks offer them,” Rossman told USA Today. “But I’ve never seen a retailer offer one.”
Amazon Credit Builder: What you need to know
Here are the features of the card:
- Annual fee: None.
- Security deposit: Must send in at least $100 (refundable).
- Sign-up bonus: $10 Amazon gift card after receipt of security deposit.
- Perks: 5 percent off for Amazon Prime members.
Since it is a secured card, you must first send in money to Amazon before you can use it. When you do, Amazon sends you a $10 gift card. In addition, Amazon Prime members save 5 percent on Amazon purchases when using the card.
However, note that the card can be used only for Amazon purchases – it is a store card, not a general use card.
See related: Is Amazon Prime worth it?
Is the Amazon Credit Builder worth it?
While much of the commentary surrounding the launch of this card was positive – asserting that it’s important to have more options for building credit – there are some downsides to the card.
For example, politicians noted that the card’s interest rate is over 28 percent. This is higher than the current average for credit cards – even for those with bad credit. Presidential candidate Bernie Sanders even threatened to “outlaw it.”
Another potential downside is that the rewards could encourage poor spending habits. The card gives 5 percent off for members of Amazon Prime, which sounds all well and good. However, an Amazon Prime membership costs $119.
If someone has poor credit, that might indicate trouble managing credit card bills – so creating an incentive to spend more by making Amazon purchases easier and cheaper could be counterproductive to the goal of building credit.
Explore your options
If you like this card and are confident you can repair your credit while living within your means, then go for it. But beware that if you charge too much and are unable to pay your bills, the financial consequences can be severe.
If your credit is good to excellent and the 5 percent off Amazon purchases appeals to you, the Amazon Prime Store Card or the Amazon Prime Rewards Visa Signature card might be more your style.
The Visa Signature can be used anywhere whereas the store card can only be used at Amazon. Both offer 5 percent back and have no annual fee.
It’s always good to have more options, but make sure you understand what you are getting into before submitting that credit card application.